In the Matter of : AND CEASE-AND-DESIST PROCEEDINGS,

 
 
 
 
 
 
 
 
 
 
 
     
  
                        
     
   
     
   
 
 
 
 
 
UNITED STATES OF AMERICA 

Before the
 
SECURITIES AND EXCHANGE COMMISSION 

SECURTIES EXCHANGE ACT OF 1934 
Release No. 64222 / April 7, 2011 
ADMINISTRATIVE PROCEEDING 
File No. 3-14327 
______________________________ 
: ORDER INSTITUTING ADMINISTRATIVE 
In the Matter of : AND CEASE-AND-DESIST PROCEEDINGS,  
:            PURSUANT            TO            SECTIONS 15(b) AND 21C   
: OF THE SECURITIES EXCHANGE 
David C. Levine, : ACT OF 1934, MAKING FINDINGS, AND  
: IMPOSING REMEDIAL SANCTIONS AND  
Respondent. : A CEASE-AND-DESIST ORDER  
______________________________: 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) against David C. Levine (“Levine” or “Respondent”). 
II. 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over him and the subject matter of 
these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a 
Cease-and-Desist (“Order”), as set forth below. 

 
 
 
 
 
 
 
 
 
  
 
 
 
                                                
 
      
  
III. 
On the basis of this Order and Respondent’s Offer, the Commission finds that
1
: 
Summary 
These proceedings arise out of violations by GunnAllen Financial, Inc. (“GunnAllen”), 
formerly a Tampa, Florida-based broker-dealer, of Regulation S-P which governs the privacy 
and protection of consumer financial information.  Between March and June 2010, as it was 
winding down its business operations and planned to file for bankruptcy, GunnAllen’s president 
authorized the transfer of approximately 16,000 direct application accounts with an estimated 
total net asset value of $850 million to Levine, who then served as GunnAllen’s National Sales 
Manager, and any broker-dealer with whom he became affiliated.  Direct application accounts 
are those accounts held by the product issuer, typically a mutual fund or insurance company.   
In connection with this transfer, and prior to resigning from GunnAllen, Levine 
downloaded nonpublic customer information for the 16,000 accounts on a portable thumb drive.  
Levine resigned from GunnAllen on April 23, 2010, and then affiliated with a new broker-dealer.  
Two weeks after joining the new broker-dealer, Levine mailed a letter, reviewed and approved 
by GunnAllen’s president and on GunnAllen letterhead, notifying the 16,000 customers that 
GunnAllen could no longer service the accounts, that Levine and his business partner were 
servicing the accounts, and advising them of their right to “opt out” of the transfer.  This letter 
failed to provide customers with a reasonable opportunity to opt out of the transfer because, 
among other things, it was sent after the customers’ information was transferred to Levine and it 
did not provide procedures on how to exercise that right, contact information or even the identity 
of the new broker-dealer.  Thereafter, Levine supplied the broker-dealer receiving the accounts 
with nonpublic personal information for the 16,000 accounts, including the product custodian, 
the account holder’s name and address, and the account number and value for each account. 
GunnAllen’s transfer of this nonpublic information without providing its customers 
reasonable notice to opt out violated Rule 10(a)(1) of Regulation S-P (17 C.F.R. §248.10(a)(1)), 
which prohibits broker-dealers from disclosing nonpublic personal information they collect from 
customers to nonaffiliated third parties unless they notify their customers of their right to opt out 
of the disclosure in accordance with Rule 7(a) of Regulation S-P (17 C.F.R. §248.7(a)), and they 
provide their customers with a reasonable opportunity to opt out of the disclosure.  Levine also 
took possession of the information in a manner that placed the information at risk of 
unauthorized access and use in contravention of GunnAllen’s obligation to ensure the security 
and confidentiality of the information as required by Rule 30(a) of Regulation S-P (the 
“Safeguard Rule”) (17 C.F.R. §248.30(a)).  As a result, Levine aided and abetted and caused 
GunnAllen’s violations of Rules 7(a), 10(a) and 30(a) of Regulation S-P.    
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 
persons or entities in this or any other proceeding. 
2
 
1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Respondent 
1. Levine, age 44, resides in Delray Beach, Florida.  From May 2005 to April 2010, 
Levine served as GunnAllen’s National Sales Manager.  Although he was employed with 
GunnAllen through the end of April 2010, on March 30, 2010, GunnAllen filed Forms U5 
terminating the registrations of all its representatives, including Levine’s. 
GunnAllen Financial, Inc. 
2. GunnAllen had a principal place of business in Tampa, Florida and was 
registered with the Commission as a broker-dealer from March 1986 to April 2010.  The firm 
operated mostly under an independent contractor model and maintained franchise offices 
nationwide.   In March 2010, the Financial Industry Regulatory Authority (FINRA) determined 
that GunnAllen did not have the requisite net capital to conduct business as a broker-dealer and 
restricted its operations to liquidating securities transactions.  Unable to raise the additional 
capital it needed to continue to conduct business, in April 2010 GunnAllen discontinued its 
operations, filed for bankruptcy, and submitted a Broker-Dealer Withdrawal, or “BDW”, Form 
with the Commission withdrawing its registration.  The withdrawal became effective on June 11, 
2010. 
The Account Transfers 
3. As it was winding down its business operations in March and April 2010, 
GunnAllen and its registered representatives transferred the firm’s customer accounts to other 
broker-dealers.  In addition to servicing the brokerage accounts held by its clearing firm, 
GunnAllen serviced and was the broker of record on tens of thousands of direct application 
accounts held by various mutual fund and variable annuity and insurance companies.  As broker 
of record on the direct application accounts, GunnAllen was entitled to the commissions, trailers 
and other fees generated by the accounts. 
4. On March 28, 2010, GunnAllen sent a letter, drafted by Levine and reviewed and 
approved by GunnAllen’s president, to all of the firm’s direct application account customers 
notifying them that it expected to cease operations on March 31, 2010 (the “First  Notice”).  The 
First Notice instructed customers that they had three options for arranging ongoing service of 
their accounts: (i) they could contact their GunnAllen registered representative to make 
arrangements to transfer their account to the new firm with which he or she associated, (ii) they 
could contact a brokerage firm of their own choice and request their account be transferred to 
that firm, or (iii) they could contact the mutual fund or variable annuity or insurance company 
holding their investment directly to make arrangements for service. 
5. However, on March 30, 2010, just two days after GunnAllen sent the First Notice, 
at the request of Levine, GunnAllen’s president authorized the transfer of approximately 16,000 
direct application accounts serviced by GunnAllen, which had an estimated total net asset value 
of $850 million.  GunnAllen’s president executed “Block Broker-Dealer Change Authorization 
for Directly Held Accounts” forms (the “Block Transfer Forms”) covering those accounts and 
3
 

 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
gave the signed Block Transfer Forms to Levine and another GunnAllen representative with 
whom Levine planned to form a business partnership when GunnAllen ceased doing business.  
The executed Block Transfer Forms authorized the transfer of the 16,000 accounts to any broker-
dealer that Levine and his partner chose to associate with after they left GunnAllen.  
6. In April 2010, while assisting in the wind down of GunnAllen’s business 
operations, Levine and his partner sought employment with other brokerage firms by offering, 
among other things, to transfer to them the direct application accounts for which they held the 
Block Transfer Forms.  On April 23, 2010, they were hired by another broker-dealer registered 
with the Commission (the “Receiving Broker”).   Levine and his partner agreed to share 10% of 
the commissions, trailers and other fees generated by the accounts with the Receiving Broker and 
to solicit the account holders to purchase additional products from the Receiving Broker. 
7. The same day that Levine was hired by the Receiving Broker, he resigned from 
GunnAllen.  On April 23, 2010, or shortly before then, Levine, with the approval of GunnAllen’s 
president, downloaded a spreadsheet from a GunnAllen computer server or drive to a personal 
thumb drive and physically removed it from the firm.  The spreadsheet contained the custodian, 
account holder’s name and address (but not his or her social security number), and account 
number and value for each of the approximately 16,000 direct application accounts covered by 
the Block Transfer Forms. 
8. Two weeks after associating with the Receiving Broker, on May 14, 2010, 
Levine, with the approval of GunnAllen’s president, sent the GunnAllen customers holding the 
direct application accounts a letter notifying them that their accounts would be transferred to the 
brokerage firm he was newly associated with unless they objected to the transfer within fifteen 
days of the date of the letter (the “Second Notice”).  Levine drafted and personally paid for the 
cost of copying and mailing the Second Notice, which was on GunnAllen letterhead.  Levine 
engaged a third party vendor to copy and mail the Second Notice on his behalf and supplied it 
with the customer names and addresses he took from GunnAllen on his thumb drive.  
9. After mailing the Second Notice, Levine contacted GunnAllen to see if it had 
received notices from any customers seeking to opt out of the account transfer, but did not take 
any other steps to verify customer objections to the transfer and, thereafter, e-mailed the 
Receiving Broker the customer account information that had been released to him by GunnAllen 
on his thumb drive.  Levine’s partner supplied the Receiving Broker with the Block Transfer 
Forms.  
10. Beginning on June 3, 2010, and continuing through at least June 7, 2010, the  
Receiving Broker counter-signed the Block Transfer Forms accepting the direct application 
accounts from GunnAllen.   It also delivered the fully executed forms to the appropriate mutual 
fund and variable annuity and insurance companies along with a letter instructing them to change 
the broker of record on the direct application accounts from GunnAllen to the Receiving Broker. 
4
 

  
 
 
 
 
 
 
 
 
 
 
     
 
 
 
 
 
                                                
 
        
      
Violations of the Privacy Rules 
11. Rule 10(a) of Regulation S-P prohibits brokers and dealers, either directly or 
through an affiliate, from disclosing nonpublic personal information about their customers to 
nonaffiliated third parties unless they have provided their customers with a privacy notice 
describing the nonpublic personal information they disclose, and notify their customers of their 
right to opt out of any disclosure and afford them a reasonable opportunity to opt out of the 
disclosure before it is made. 
12. Rule 7(a) of Regulation S-P requires brokers and dealers to provide their 
customers with opt out notices that are clear and conspicuous and that accurately explain 
customers’ opt out rights.  The notice must explicitly state that the broker or dealer discloses, or 
reserves the right to disclose, nonpublic personal information about its customers and that they 
have the right to opt out of any disclosure. Additionally, the notice must provide a reasonable 
means by which customers can exercise their right to opt out.  
13. GunnAllen violated Rules 7(a) and 10(a) of Regulation S-P by failing to provide 
the direct application account customers whose accounts were transferred to the Receiving 
Broker with proper notice and a reasonable opportunity to opt out of the transfer before 
supplying their personal nonpublic information to Levine and the Receiving Broker.  Also, 
GunnAllen’s disclosure of the information was not covered by any exception from Regulation S-
P’s notice and opt out requirements, including an exception in Rule 14 of Regulation S-P for 
disclosures that are required, or are a usual, appropriate, or acceptable method, in connection 
with the transfer of accounts, because GunnAllen failed to obtain the customers’ affirmative 
consent to transfer the direct applications accounts.  The First and Second Notices failed to 
inform account holders that GunnAllen would physically transfer or, in the case of the Second 
Notice, had physically transferred, their account information.  The Second Notice also failed to 
provide account holders with a reasonable means to exercise their right to opt out of the transfer, 
or sufficient time within which to do so.    Further, the direct application account customers were 
not provided with a paper or electronic form to object to the transfer although Rule 7(a)(2)(iii) of 
Regulation S-P expressly states it is unreasonable “if the only means of opting out is for the 
consumer to write his or her own letter to exercise the opt out right.”  Finally, the Second Notice 
provided only fifteen days to opt out of the transfer although the circumstances did not warrant 
such a short response period. 
14. As a result of the conduct described above, Levine willfully
2
 aided and abetted 
and caused GunnAllen’s violations of Rules 7(a) and 10(a) of Regulation S-P.   
Violations of the Safeguard Rule 
15. Rule 30(a) of Regulation S-P, or the Safeguard Rule, requires every broker and 
dealer to maintain policies and procedures that address administrative, technical, and physical 
 A willful violation of the securities laws means merely “that the person charged with the duty knows what he is 
doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Huges v. SEC, 174 F.2d 969, 977 (D.C. Cir. 
1949). 
5
 
2

   
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
safeguards for the protection of customer records and information.  The policies and procedures 
must be reasonably designed to (1) insure the security and confidentiality of customer records 
and information; (2) protect against any anticipated threats or hazards to the security or integrity 
of customer records and information; and (3) protect against unauthorized access to or use of 
customer records or information that could result in substantial harm or inconvenience to any 
customer. 
16. GunnAllen violated Rule 30(a) of Regulation S-P because it knew that there was a 
reasonably foreseeable risk that its departing registered representatives would disclose customer 
nonpublic personal information to successor brokerage firms but nonetheless failed to adopt, and 
did not have in place while winding down its operations, any written policies or procedures 
addressing the transfer and protection of such information.   
17. As a senior officer of GunnAllen, Levine was familiar with Regulation S-P and 
GunnAllen’s responsibilities under the rule for maintaining the confidentiality and physical 
security of the information that the firm collected from its customers.  Nonetheless, he placed 
customer information at risk of unauthorized access and misuse when he knowingly downloaded 
customer information for approximately 16,000 GunnAllen direct application accounts to a 
personal thumb drive that he physically took from the firm.   
18. As a result of the conduct described above, Levine willfully aided and abetted and 
caused GunnAllen’s violations of Rule 30(a) of Regulation S-P.  
IV. 
In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent’s Offer. 
Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby 
ORDERED that: 
A. Respondent Levine cease and desist from committing or causing any violations and 
any future violations of Rules 7(a), 10(a) and 30(a) of Regulation S-P. 
B.	 R 
espondent Levine is censured. 
C. Respondent Levine shall, within ten days of the entry of this Order, pay a civil money 
penalty of $20,000 to the United States Treasury.     If timely payment is not made additional 
interest shall accrue pursuant to 31 U.S.C. 3717.  Such payment shall be: (A) made by wire 
transfer, United States postal money order, certified check, bank cashier’s check, or bank money 
order; (B) payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to 
the Office of Financial Management, Securities and Exchange Commission, Operations Center, 
6432 General Green Way, Alexandria, VA  22312-0003; and (D) submitted under cover letter 
that identifies Levine as a Respondent in these proceedings, the file number of these  
6
 

 
proceedings, a copy of which cover letter and wire transfer, money order or check shall be sent 
to Teresa J. 
7
 

 
 
 
 
 
        
 
Verges, Assistant Regional Director, Miami Regional Office, Securities and Exchange 
Commission, 801 Brickell Avenue,  Suite 1800, Miami, FL 33131. 
By the Commission. 
Elizabeth M. Murphy 
       Secretary 
8
 

 
 
 
 
   
  
 
 
 
 
   
  
 
 
 
 
 
 
 
 
Service List 
Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another 
duly authorized officer of the Commission, shall serve a copy of the Order Instituting 
Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-
and-Desist Order ("Order") on the Respondent and his legal agent. 
The attached Order has been sent to the following parties and other persons entitled to 
notice: 
Honorable Brenda P. Murray 
Chief Administrative Law Judge 
Securities and Exchange Commission 
100 F Street, N.E. 
Washington, DC 20549-2557                                                
Teresa J. Verges, Esq. 
Miami Regional Office 
Securities and Exchange Commission 
801 Brickell Avenue, Suite 1800 
Miami, FL  33131 
David C. Levine 
c/o Gregg J. Breitbart, Esq. 
Gusrae, Kaplan, Bruno & Nusbaum PLLC 
2101 NW Corporate Boulevard, Suite 218 
Boca Raton, FL 33431 
Gregg J. Breitbart, Esq. 
Gusrae, Kaplan, Bruno & Nusbaum PLLC 
2101 NW Corporate Boulevard, Suite 218 
Boca Raton, FL 33431 
9
 

UNITED STATES OF AMERICA 

Before the
 

SECURITIES AND EXCHANGE COMMISSION 


SECURTIES EXCHANGE ACT OF 1934 
Release No. 64222 / April 7, 2011 

ADMINISTRATIVE PROCEEDING 
File No. 3-14327 
______________________________ 

: ORDER INSTITUTING ADMINISTRATIVE 
In the Matter of : AND CEASE-AND-DESIST PROCEEDINGS,  

: PURSUANT TO SECTIONS 15(b) AND 21C   
: OF THE SECURITIES EXCHANGE 

David C. Levine, : ACT OF 1934, MAKING FINDINGS, AND  
: IMPOSING REMEDIAL SANCTIONS AND  

Respondent. : A CEASE-AND-DESIST ORDER  
______________________________: 

I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) against David C. Levine (“Levine” or “Respondent”). 

II. 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over him and the subject matter of 
these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a 
Cease-and-Desist (“Order”), as set forth below. 



 

 
 

 

 
 

 

 

 

  
 

 

 

                                                 
      

  

III. 

On the basis of this Order and Respondent’s Offer, the Commission finds that1: 

Summary 

These proceedings arise out of violations by GunnAllen Financial, Inc. (“GunnAllen”), 
formerly a Tampa, Florida-based broker-dealer, of Regulation S-P which governs the privacy 
and protection of consumer financial information.  Between March and June 2010, as it was 
winding down its business operations and planned to file for bankruptcy, GunnAllen’s president 
authorized the transfer of approximately 16,000 direct application accounts with an estimated 
total net asset value of $850 million to Levine, who then served as GunnAllen’s National Sales 
Manager, and any broker-dealer with whom he became affiliated.  Direct application accounts 
are those accounts held by the product issuer, typically a mutual fund or insurance company.   

In connection with this transfer, and prior to resigning from GunnAllen, Levine 
downloaded nonpublic customer information for the 16,000 accounts on a portable thumb drive.  
Levine resigned from GunnAllen on April 23, 2010, and then affiliated with a new broker-dealer.  
Two weeks after joining the new broker-dealer, Levine mailed a letter, reviewed and approved 
by GunnAllen’s president and on GunnAllen letterhead, notifying the 16,000 customers that 
GunnAllen could no longer service the accounts, that Levine and his business partner were 
servicing the accounts, and advising them of their right to “opt out” of the transfer.  This letter 
failed to provide customers with a reasonable opportunity to opt out of the transfer because, 
among other things, it was sent after the customers’ information was transferred to Levine and it 
did not provide procedures on how to exercise that right, contact information or even the identity 
of the new broker-dealer. Thereafter, Levine supplied the broker-dealer receiving the accounts 
with nonpublic personal information for the 16,000 accounts, including the product custodian, 
the account holder’s name and address, and the account number and value for each account. 

GunnAllen’s transfer of this nonpublic information without providing its customers 
reasonable notice to opt out violated Rule 10(a)(1) of Regulation S-P (17 C.F.R. §248.10(a)(1)), 
which prohibits broker-dealers from disclosing nonpublic personal information they collect from 
customers to nonaffiliated third parties unless they notify their customers of their right to opt out 
of the disclosure in accordance with Rule 7(a) of Regulation S-P (17 C.F.R. §248.7(a)), and they 
provide their customers with a reasonable opportunity to opt out of the disclosure.  Levine also 
took possession of the information in a manner that placed the information at risk of 
unauthorized access and use in contravention of GunnAllen’s obligation to ensure the security 
and confidentiality of the information as required by Rule 30(a) of Regulation S-P (the 
“Safeguard Rule”) (17 C.F.R. §248.30(a)). As a result, Levine aided and abetted and caused 
GunnAllen’s violations of Rules 7(a), 10(a) and 30(a) of Regulation S-P.    

 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 
persons or entities in this or any other proceeding. 

2
 

1



 

 

 
 

 
 

 
 

 
 

 

 

 
 

 
 

 
 

 

 
 

 

Respondent 

1. Levine, age 44, resides in Delray Beach, Florida.  From May 2005 to April 2010, 
Levine served as GunnAllen’s National Sales Manager.  Although he was employed with 
GunnAllen through the end of April 2010, on March 30, 2010, GunnAllen filed Forms U5 
terminating the registrations of all its representatives, including Levine’s. 

GunnAllen Financial, Inc. 

2.  GunnAllen had a principal place of business in Tampa, Florida and was 
registered with the Commission as a broker-dealer from March 1986 to April 2010.  The firm 
operated mostly under an independent contractor model and maintained franchise offices 
nationwide. In March 2010, the Financial Industry Regulatory Authority (FINRA) determined 
that GunnAllen did not have the requisite net capital to conduct business as a broker-dealer and 
restricted its operations to liquidating securities transactions.  Unable to raise the additional 
capital it needed to continue to conduct business, in April 2010 GunnAllen discontinued its 
operations, filed for bankruptcy, and submitted a Broker-Dealer Withdrawal, or “BDW”, Form 
with the Commission withdrawing its registration.  The withdrawal became effective on June 11, 
2010. 

The Account Transfers 

3. As it was winding down its business operations in March and April 2010, 
GunnAllen and its registered representatives transferred the firm’s customer accounts to other 
broker-dealers. In addition to servicing the brokerage accounts held by its clearing firm, 
GunnAllen serviced and was the broker of record on tens of thousands of direct application 
accounts held by various mutual fund and variable annuity and insurance companies.  As broker 
of record on the direct application accounts, GunnAllen was entitled to the commissions, trailers 
and other fees generated by the accounts. 

4. On March 28, 2010, GunnAllen sent a letter, drafted by Levine and reviewed and 
approved by GunnAllen’s president, to all of the firm’s direct application account customers 
notifying them that it expected to cease operations on March 31, 2010 (the “First  Notice”). The 
First Notice instructed customers that they had three options for arranging ongoing service of 
their accounts: (i) they could contact their GunnAllen registered representative to make 
arrangements to transfer their account to the new firm with which he or she associated, (ii) they 
could contact a brokerage firm of their own choice and request their account be transferred to 
that firm, or (iii) they could contact the mutual fund or variable annuity or insurance company 
holding their investment directly to make arrangements for service. 

5. However, on March 30, 2010, just two days after GunnAllen sent the First Notice, 
at the request of Levine, GunnAllen’s president authorized the transfer of approximately 16,000 
direct application accounts serviced by GunnAllen, which had an estimated total net asset value 
of $850 million.  GunnAllen’s president executed “Block Broker-Dealer Change Authorization 
for Directly Held Accounts” forms (the “Block Transfer Forms”) covering those accounts and 

3
 



 

 

 
 

 

 
 

   

 
 

 

 
 

 
 

 

gave the signed Block Transfer Forms to Levine and another GunnAllen representative with 
whom Levine planned to form a business partnership when GunnAllen ceased doing business.  
The executed Block Transfer Forms authorized the transfer of the 16,000 accounts to any broker-
dealer that Levine and his partner chose to associate with after they left GunnAllen.  

6.  In April 2010, while assisting in the wind down of GunnAllen’s business 
operations, Levine and his partner sought employment with other brokerage firms by offering, 
among other things, to transfer to them the direct application accounts for which they held the 
Block Transfer Forms.  On April 23, 2010, they were hired by another broker-dealer registered 
with the Commission (the “Receiving Broker”).   Levine and his partner agreed to share 10% of 
the commissions, trailers and other fees generated by the accounts with the Receiving Broker and 
to solicit the account holders to purchase additional products from the Receiving Broker. 

7. The same day that Levine was hired by the Receiving Broker, he resigned from 
GunnAllen. On April 23, 2010, or shortly before then, Levine, with the approval of GunnAllen’s 
president, downloaded a spreadsheet from a GunnAllen computer server or drive to a personal 
thumb drive and physically removed it from the firm.  The spreadsheet contained the custodian, 
account holder’s name and address (but not his or her social security number), and account 
number and value for each of the approximately 16,000 direct application accounts covered by 
the Block Transfer Forms. 

8. Two weeks after associating with the Receiving Broker, on May 14, 2010, 
Levine, with the approval of GunnAllen’s president, sent the GunnAllen customers holding the 
direct application accounts a letter notifying them that their accounts would be transferred to the 
brokerage firm he was newly associated with unless they objected to the transfer within fifteen 
days of the date of the letter (the “Second Notice”).  Levine drafted and personally paid for the 
cost of copying and mailing the Second Notice, which was on GunnAllen letterhead.  Levine 
engaged a third party vendor to copy and mail the Second Notice on his behalf and supplied it 
with the customer names and addresses he took from GunnAllen on his thumb drive.  

9. After mailing the Second Notice, Levine contacted GunnAllen to see if it had 
received notices from any customers seeking to opt out of the account transfer, but did not take 
any other steps to verify customer objections to the transfer and, thereafter, e-mailed the 
Receiving Broker the customer account information that had been released to him by GunnAllen 
on his thumb drive.  Levine’s partner supplied the Receiving Broker with the Block Transfer 
Forms.  

10. Beginning on June 3, 2010, and continuing through at least June 7, 2010, the  
Receiving Broker counter-signed the Block Transfer Forms accepting the direct application 
accounts from GunnAllen. It also delivered the fully executed forms to the appropriate mutual 
fund and variable annuity and insurance companies along with a letter instructing them to change 
the broker of record on the direct application accounts from GunnAllen to the Receiving Broker. 

4
 



  

 

 
 

 
 

 
 

 
 

 

     
 

 
 

 
 

                                                 
        

      

Violations of the Privacy Rules 

11. Rule 10(a) of Regulation S-P prohibits brokers and dealers, either directly or 
through an affiliate, from disclosing nonpublic personal information about their customers to 
nonaffiliated third parties unless they have provided their customers with a privacy notice 
describing the nonpublic personal information they disclose, and notify their customers of their 
right to opt out of any disclosure and afford them a reasonable opportunity to opt out of the 
disclosure before it is made. 

12. Rule 7(a) of Regulation S-P requires brokers and dealers to provide their 
customers with opt out notices that are clear and conspicuous and that accurately explain 
customers’ opt out rights.  The notice must explicitly state that the broker or dealer discloses, or 
reserves the right to disclose, nonpublic personal information about its customers and that they 
have the right to opt out of any disclosure. Additionally, the notice must provide a reasonable 
means by which customers can exercise their right to opt out.  

13. GunnAllen violated Rules 7(a) and 10(a) of Regulation S-P by failing to provide 
the direct application account customers whose accounts were transferred to the Receiving 
Broker with proper notice and a reasonable opportunity to opt out of the transfer before 
supplying their personal nonpublic information to Levine and the Receiving Broker.  Also, 
GunnAllen’s disclosure of the information was not covered by any exception from Regulation S-
P’s notice and opt out requirements, including an exception in Rule 14 of Regulation S-P for 
disclosures that are required, or are a usual, appropriate, or acceptable method, in connection 
with the transfer of accounts, because GunnAllen failed to obtain the customers’ affirmative 
consent to transfer the direct applications accounts.  The First and Second Notices failed to 
inform account holders that GunnAllen would physically transfer or, in the case of the Second 
Notice, had physically transferred, their account information.  The Second Notice also failed to 
provide account holders with a reasonable means to exercise their right to opt out of the transfer, 
or sufficient time within which to do so.  Further, the direct application account customers were 
not provided with a paper or electronic form to object to the transfer although Rule 7(a)(2)(iii) of 
Regulation S-P expressly states it is unreasonable “if the only means of opting out is for the 
consumer to write his or her own letter to exercise the opt out right.”  Finally, the Second Notice 
provided only fifteen days to opt out of the transfer although the circumstances did not warrant 
such a short response period. 

14. As a result of the conduct described above, Levine willfully2 aided and abetted 
and caused GunnAllen’s violations of Rules 7(a) and 10(a) of Regulation S-P.   

Violations of the Safeguard Rule 

15. Rule 30(a) of Regulation S-P, or the Safeguard Rule, requires every broker and 
dealer to maintain policies and procedures that address administrative, technical, and physical 

 A willful violation of the securities laws means merely “that the person charged with the duty knows what he is 
doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Huges v. SEC, 174 F.2d 969, 977 (D.C. Cir. 
1949). 

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safeguards for the protection of customer records and information.  The policies and procedures 
must be reasonably designed to (1) insure the security and confidentiality of customer records 
and information; (2) protect against any anticipated threats or hazards to the security or integrity 
of customer records and information; and (3) protect against unauthorized access to or use of 
customer records or information that could result in substantial harm or inconvenience to any 
customer. 

16. GunnAllen violated Rule 30(a) of Regulation S-P because it knew that there was a 
reasonably foreseeable risk that its departing registered representatives would disclose customer 
nonpublic personal information to successor brokerage firms but nonetheless failed to adopt, and 
did not have in place while winding down its operations, any written policies or procedures 
addressing the transfer and protection of such information.   

17. As a senior officer of GunnAllen, Levine was familiar with Regulation S-P and 
GunnAllen’s responsibilities under the rule for maintaining the confidentiality and physical 
security of the information that the firm collected from its customers.  Nonetheless, he placed 
customer information at risk of unauthorized access and misuse when he knowingly downloaded 
customer information for approximately 16,000 GunnAllen direct application accounts to a 
personal thumb drive that he physically took from the firm.   

18. As a result of the conduct described above, Levine willfully aided and abetted and 
caused GunnAllen’s violations of Rule 30(a) of Regulation S-P.  

IV. 

In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent’s Offer. 

Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby 
ORDERED that: 

A. Respondent Levine cease and desist from committing or causing any violations and 
any future violations of Rules 7(a), 10(a) and 30(a) of Regulation S-P. 

B.	 R 
espondent Levine is censured. 

C. Respondent Levine shall, within ten days of the entry of this Order, pay a civil money 
penalty of $20,000 to the United States Treasury.  If timely payment is not made additional 
interest shall accrue pursuant to 31 U.S.C. 3717.  Such payment shall be: (A) made by wire 
transfer, United States postal money order, certified check, bank cashier’s check, or bank money 
order; (B) payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to 
the Office of Financial Management, Securities and Exchange Commission, Operations Center, 
6432 General Green Way, Alexandria, VA  22312-0003; and (D) submitted under cover letter 
that identifies Levine as a Respondent in these proceedings, the file number of these  

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proceedings, a copy of which cover letter and wire transfer, money order or check shall be sent 
to Teresa J. 

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Verges, Assistant Regional Director, Miami Regional Office, Securities and Exchange 
Commission, 801 Brickell Avenue,  Suite 1800, Miami, FL 33131. 

By the Commission. 

Elizabeth M. Murphy 
       Secretary  

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Service List 

Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another 
duly authorized officer of the Commission, shall serve a copy of the Order Instituting 
Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-
and-Desist Order ("Order") on the Respondent and his legal agent. 

The attached Order has been sent to the following parties and other persons entitled to 
notice: 

Honorable Brenda P. Murray 
Chief Administrative Law Judge 
Securities and Exchange Commission 
100 F Street, N.E. 
Washington, DC 20549-2557  

Teresa J. Verges, Esq. 
Miami Regional Office 
Securities and Exchange Commission 
801 Brickell Avenue, Suite 1800 
Miami, FL  33131 

David C. Levine 
c/o Gregg J. Breitbart, Esq. 
Gusrae, Kaplan, Bruno & Nusbaum PLLC 
2101 NW Corporate Boulevard, Suite 218 
Boca Raton, FL 33431 

Gregg J. Breitbart, Esq. 
Gusrae, Kaplan, Bruno & Nusbaum PLLC 
2101 NW Corporate Boulevard, Suite 218 
Boca Raton, FL 33431 

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